The Politics Of An Economics Prize
October 27, 1999
The award of this year's Nobel Memorial Prize in economics to Columbia University economist Robert Mundell has aroused more than the usual amount of controversy because, unlike the awards for the hard sciences, there is an element of political judgment in the economics award.
In Mundell's case, the political issue is supply-side economics, which he has espoused for many years. To many, supply-side economics remains a kooky theory about cutting taxes without losing any revenue, which caused the massive budget deficits of the 1980s.
More serious critics of supply-side economics, such as Business Week magazine and Massachusetts Institute of Technology economist Paul Krugman, have simply contented themselves with noting (correctly) that the Royal Swedish Academy of Sciences made no mention of Mundell's work in supply-side economics in its citation.
Of course, the award is for theoretical accomplishments only. It may well be that the Academy simply chose to ignore Mundell's supply-side affiliation; but more than likely, they knew exactly what they were doing -- which is confirmed in a review of the prize by Ronald Wirtz of the Federal Reserve Bank of Minneapolis. For example, when the 1995 award went to Robert Lucas, the Academy knew that it was also acknowledging the "rational expectations" school of economics to which he belongs. Similarly, the 1986 award to James Buchanan acknowledged the "public choice" school, which he founded.
Krugman and other critics may continue to deny that the Mundell award has any significance for supply-side economics. But even Business Week in 1995 admitted that "the basic supply-side notion has become commonplace: Economic growth depends on how tax rates, regulations, and inflation affect investment, entrepreneurship, and work effort." In truth, supply-side economics has simply become part of the mainstream.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 27, 1999.
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